The June Federal Reserve rate hike wasn’t a surprise. Most analysts expected Yellen and company to boost rates by 0.25 points. The only thing that was a little surprising was the hawkish tone the central bankers took at the most recent Federal Open Market Committee meeting. The Fed is hinting it will continue to push forward with interest rate normalization and begin to shrink its balance sheet. This raises an important question.
As we have pointed out, the data simply doesn’t support the hawkish stance taken by the Fed. Even some mainstream analysts have made this observation. So what gives? Why is the Federal Reserve so desperate to hike rates?
In a recent interview with Business Insider CEO Henry Blodget on “The Bottom Line,” investor and market analysts Jim Rogers said we should expect a market crash in the next few years that will rival anything we’ve seen in our lifetime.
Some stocks in America are turning into a bubble. The bubble’s gonna come. Then it’s going to collapse, and you should be very worried.”
Some have dubbed it the “Trump Bump.”
Since the election of Donald Trump, the stock market has soared. Many Americans believed the new president would turn things around and “make America great again!” Meanwhile, the sale of precious metals has slumped in the US. While sales of gold and silver have soared in places like China and India, Americans have been buying up US stocks.
Want to get rich?
Start out by going $100,000 in debt.
That’s the advice offered by JP Sears in a hilarious video that rips up the conventional wisdom on higher education and vividly illustrates the growing student loan debt problem in the United States.
I know the most intelligent way to start making a lot of money is to find a way to get at least $100,000 in debt before you even begin making money. So, I decided to go to college.”
In a recent interview with Mike Maloney, Chris Martenson of PeakProsperity.com, called the current US and global financial system “deeply unfair.”
Martenson made the case that the system is stacked against the average person in favor of the big banks primarily because these financial institutions never have to worry about the consequences of their decisions.
It’s heads they win, tails you lose. Banks take extraordinary risks, and they make profits, and they get record bonuses. They take extraordinary risks and it blows up on them, and they go and they get bailouts, and now bail-ins. But it doesn’t matter. One way or another they don’t take the consequences for their risky behavior.”
Peter Schiff once again went toe-to-toe with one of his favorite foes on CNBC’s Futures Now. After Peter explained why the Fed won’t be able to shrink its balance sheet, Scott Nations challenged him, citing GDP growth, unemployment numbers, and low inflation as reasons we should view the economy as strong.
When Peter pointed out that the jobs numbers were not good, Nations suddenly reversed course proclaiming, “That has nothing to do with whether or not we’re in a recession!” Then Nations went after Peter on gold. That’s when Peter really let him have it. Check out the video.
Conventional wisdom tells us Federal Reserve monetary tightening is bad for precious metals. Analysts typically assume rising interest rates and a strengthening dollar will suppress gold prices. The Federal Reserve has raised interest rates twice in the last four months and has hinted at as many as three more hikes in 2017. While the economic environment and the Fed’s commitment to “data dependent” decision making doesn’t seem to support this trend of tightening, the central bank’s actions have dampened some of the enthusiasm for gold and silver.
But as Investment Strategy: ETF Securities director Maxwell Gold pointed out during a recent interview, this isn’t always the case. Historically, there are periods in which gold and the dollar simultaneously move higher.
Peter Schiff appeared on MSNBC’S “Up with Chris Hayes” with a panel of other experts and pundits to debate the Fed’s role in the housing bubble, Republican views on the economy, and the effects of inflation on prices.
Peter had a spirited exchanged with Karl Smith, Economics Professor from the University of Carolina, on the causes of the housing crisis. Smith took the typical stance of blaming complicated investment instruments for creating confusion in the market. Peter countered with the primary cause stemming from a combination of artificially low interest rates and Fannie and Freddie’s role in making cheap mortgages available to too many people who couldn’t afford them.
Peter Schiff recently appeared on RT News and laid out how he sees gold prices and the US economy moving into 2017. Inflation vs. interest rates, the stock market bubble, and downturns in mortgage/auto financial markets were a few of the topics Peter provided insights and predictions about. He also dispelled four economic myths surrounding the Fed’s positive outlook, Trump’s fiscal plans, and how inflation impacts gold prices.
In her rate hike announcement last week, Janet Yellen said the Fed was so confident in the health of the US economy that it was raising the Federal Funds rate by a paltry quarter point. Investors are on board, with a wave of irrational exuberance sending the Dow closer to its 20,000-point milestone. However, the Fed’s decision suggests the need for a strict comparison with its statements last December: a time when a similar expression of economic confidence would prove to substantially miss the mark for rate hike expectations and GDP growth.
In a special episode of the Schiff Report, Peter Schiff shows how the Fed’s economic optimism is a ploy to maintain credibility with the markets and to cover up the fact that significant rate increases are impossible.